Summary: Financing for Universal Health Coverage · 2019. 11. 15. · Health Care Financing module, 6-15 November 2019 Summary: Financing for Universal Health Coverage Reinhard Busse*

Health Care Financingmodule, 6-15 November 2019

Summary: Financing forUniversal Health Coverage

Reinhard Busse*

Peter Agyei Bafour**

* Department of Health Care Management (WHO Collaborating Centre for Health Systems Research and Management), Technische Universität Berlin, Germany & European Observatory on Health Systems and Policies** School of Public Health, KNUST, Kumasi, Ghana

Week 1 Monday Tuesday Wednesday (6.11.) Thursday (7.11.) Friday (8.11.)

08:00 - 10:00

Group work: finding

information from

databases

Social health insurance

systems

10:30 - 12:30Raising resources,

pooling and allocationTax financed systems

13:00 - 15:00

Introduction,

expectations, course

outline

Out-of-pocket

→ voluntary/private

health insurance

→ community-based

health insurance

Group work:

advantages/

disadvantages of SHI

systems vs. tax

financed systems

15:30 - 17:30 Frameworks

2

Outline of the course

15 November 2019 Summary: Financing for UHC

Week 2 Monday (11.11.) Tuesday (12.11.) Wednesday (13.11.) Thursday (14.11.) Friday (15.11.)

08:00 - 10:00

Payment systems 1:

Overview & Primary

care

Summary: Financing

for universal coverage

10:30 - 12:30

Group work: different

pathways to UHC –

option

Payment systems 2:

HospitalsEquity in financing

Mid-term exam +

questions and wrap-

up

13:00 - 15:00

Moving from

fragmented systems

to universal coverage

Group work:

presenting the

pathway to UHC

Group work:

Advantages and

disadvantages of

DRGs vs. capitation

Financial protection,

financial accessibility

15:30 - 17:30

PUBLIC LECTURE:

Evidence-informed

health policy: Which

evidence? How to

inform? Does it work?

Purchasing

GUEST LECTURE

Francis Adjei (NHIA):

Overview of the three

health financing

functions in Ghana

3

Why is health care financing important?



1 Frameworks

WHO based on R. Busse515 November 2019 Summary: Financing for UHC

The UHC Cube in WHO reports 2010, 2013

Third-party Payer

ProvidersPopulation

Collector of resources

7

Health Care Financing Functions


Steward/ Regulator

Financing II:Resource pooling & allocation

Financing I:Raising resources/

funding

Financing III: Purchasing/ contracting/

paying providers

Coverage:Who? What?How much?

Access to services

Provision of servicesCost sharing & Out-of-pocket

Third-party Payer

ProvidersPopulation


Financing II:Resource pooling & allocation

Financing I:Raising resources/

funding

Financing III: Purchasing/ contracting/

paying providers

Access to services

Steward/ Regulator

Coverage:Who? What?How much?


System typology

Provision of services

Regulation

Income-dependent contributions

& sickness funds =

Social Health Insurance system

Taxes &

governments/ health authorities

= tax-funded system (NHS)

Risk-related premia

& private insurers =

Voluntary Health Insurance system


2 Raising resources, pooling & allocation

107 November 2019 Raising resources, pooling & allocation

Total Health Expenditure as % of GDP

Source: World Bank (2019): World development indicators database based on World Health Organization Global Health Expenditure database

3

5

7

9

11

13

15

17

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cu

rren

t h

ealt

h e

xpen

dit

ure

(%

of

GD

P)

United States

High income

Germany

European Union

Low income

Sub-SaharanAfrica


External assistance as funding source

Problem 2: national gov‘ts

reduce spendingon health

Problem 1: unreliablesource of funding

year-on-year

Source: Agency for Healthcare Research and Quality analysis of 2014 Medical Expenditure Panel Survey

1%5%

10%

50%

65%

22%

50%

97%

Population Share of Health Spending

USA (2014)

10%

65%


Expenditure is highly skewed

Third-party Payer

ProvidersPopulation


Resource pooling & allocation

Pooling and (re-)allocation is important

Summary: Financing for UHC 15 November 2019

Steward/ Regulator

Re-allocation should bebased on risk (not utilization)

Fair financing:Contributions according

to ability to pay

Purchasing/paymentaccording to need

(and quality)

Particularly important in caseof competing purchasers→ avoid risk-selection

13

Large poolsare better at

spreadingthe risk


Financing sources by country income group

Source: ILO 2014


Voluntary and Community-based Health Insurance


Voluntary health insurance plays a minor role in financing health care …

177 November 2019 OOP --> voluntary --> community-based health insurance

… and only fills gaps left by the public system - or is duplicative (“supplementary”) to it

Substitutive

Supplementary

Complementary (services)

Complementary (user charges)


More VHI does not mean lower OOPs

Sarah Thomson: VHI

Main advantages

▪ may develop with relatively little government intervention

Pros and cons of VHI systems

Main disadvantages

▪ does not achieve significant population coverage

▪ access and affordability problems are inevitable

▪ difficult to regulate in a way that it contributes to UHC →make mandatory

15 November 2019 Summary: Financing for UHC 19


Conclusion: CBHI

Positive - Improved access for members- Improved financial protection for members- Builds local (administrative/managerial) capacity- Includes informal sector- Very transaprent (local control)

Negative - Low population coverage- Voluntary insurance→ adverse selection- Exclusion of the poor (high premiums) - Limited financial protection (only basic services –insufficient resources)-Risk of increasing inequities

Source: Ekman 2004

→ Step in the direction of UHC?


Social Health Insurance

Third-party Payer

ProvidersPopulation


Copayments

Mandatory insurance(traditionally employees)


SHI Basic characteristics

No risk-relatedpremium (usuallyrelated to income) Limited government

control

Contracts

Public/private mix

Usually Sometimes

Choice of SHI Fund

Contributions of employers

Obligation to treat

Defined benefitspackage

Negotiated rates ofreimbursement

Selective/collective

Independent self-governing funds(bipartite/tripartite)

Resource pooling within and/or across funds;risk-based allocation

Choice among contracted providers


In LMIC: tax funding for SHI is even moreimportant

Tax funding shouldbe targeted to the

poor

Main advantages

▪ legal entitlement to benefits

▪ more choice

▪ of payer

▪ of provider

▪ free access: “every patient is a private patient”

▪ financing more transparent?

▪ less political interference?

Pros and cons of SHI systems

Main disadvantages

▪ difficult to implement with large informal sector

▪ contributions levied on wages, not income

▪ coverage limited to curative services?

▪ tax revenues still important – up to 40%!

▪ administrative complexity



Tax-funded systems

Type Examples

Direct Levied on income / revenue/ assets

Indirect Levied on consumption

National Levied by central government

Local Levied by local government

General Assigned to general revenue

Earmarked Assigned to specific sectors

Different types of tax

8 November 2019 Tax-funded health systems 26

278 November 2019 Tax-funded health systems

Public health spending and tax revenue

Higher percentage

Lower percentage

Main advantages

▪ automatic population coverage

▪ broad revenue base

▪ equity of financing?

▪ enables trade-offs between spending priorities

▪ tight cost control

▪ responsibility for population health in the hands of gov’t

▪ democratic accountability

Pros and cons of tax-funded systems

Main disadvantages

▪ funding depends on fiscal space

▪ funding depends on political priorities

▪ regional inequity in case of decentralized revenue generation/pooling/purchasing

▪ often weak purchasing arrangements

▪ still less choice

▪ political decision-making



From fragmented systems to UHC

Providers:often separate

for differentsegments

Population

Private Insurance

3011 November 2019 From fragmented systems to UHC

Rich

Formalsector

Poor

Sickness fundsGovernment+CBHI

Fragmented systems = inequitablefinancial protection, fragmented pools …


need to extend coverage

→ by (1) extending tax-financed coverage (bottom-up) or …


(2) extending the SHI system (top-down)


Achieving universal population coveragehas often taken long … but may go quickly


3 Purchasing

Payer

ProvidersPopulation



What is purchasing?

Steward/ Regulator Strategic purchasing =

“proactive decisions …

about which services

should be purchased,

how and from whom”

(WHO 2000)

– What services?

– How much?

– From whom?

– How to buy?

– Who should buy?

– For whom?

35


How to improve purchasing

Purchaser(Agent)

Providers(Agent)

Population / Citizen(Principal)

Government / Steward

(Principal)

Principal3. Incorporate Health Needs

4. Empower the Citizens (voice, choice)

1. Strengthen stewardship and improve regulatory framework

5. Establish a network6. Cost-effective

contracting7. Employ the right

payment incentives

2. Strengthening purchasers

36


4 Payment systems


Advantages and disadvantages of different payment mechanisms

Paymentmecha-

nism

Patient needs (risk

selection)

ActivityExpendi-

turecontrol

Technical efficiency

Trans-parency

QualityAdmini-strative

simplicityNumber

of cases

Number of services/

case

Fee-for-service + + + ― 0 0 0 ―

Capi-tation

―(if not risk-adjusted)

+ ― + + ― 0 0

Salary 0 ― ― + 0 ― 0 +


A framework for analysis of payment methods

ef

d

ABC

Provider characteristics:

salary

Service characteristics:Fee-for-service

Patient characteristics:Capitation, case

payment

A B

C

Information basisto define payment

Source: based on Ellis and Miller, 2009

1. Information basis to define payment➢ Blended (combined) payment systems

reduce the strength of paymentincentives

… but blendedpayment systems are

more complex!


Hospital payment: Advantages and disadvantages of different payment mechanisms

Paymentmecha-

nism

Patient needs (risk

selection)

ActivityExpendi-

turecontrol

Technical efficiency

Trans-parency

QualityAdmini-strative

simplicityNumber

of cases

Number of services/

case

Fee-for-service + + + ― 0 0 0 ―

DRG-basedcase payment

0 + ― 0 + + 0 ―

Global budget ― ― ― + 0 ― 0 +


Intended and unintended consequencesIncentives of DRG-based

hospital payment

Strategies of hospitals

1. Reduce costs per

patient

a) Reduce length of stay

• optimize internal care pathways

• inappropriate early discharge (‘bloody discharge’)

b) Reduce intensity of provided services

• avoid delivering unnecessary services

• withhold necessary services (‘skimping/undertreatment’)

c) Select patients

• specialize in treating patients for which the hospital has a competitive

advantage

• select low-cost patients within DRGs (‘cream-skimming’)

2. Increase revenue per

patient

a) Change coding practice

• improve coding of diagnoses and procedures

• fraudulent reclassification of patients, e.g. by adding inexistent

secondary diagnoses (‘up-coding’)

b) Change practice patterns

• provide services that lead to reclassification of patients into higher

paying DRGs (‘gaming/overtreatment’)

3. Increase number of

patients

a) Change admission rules

• reduce waiting list

• admit patients for unnecessary services (‘supplier-induced demand’)

b) Improve reputation of hospital

• improve quality of services

• focus efforts exclusively on measurable areas


5 Financial protection


What do we know about cost-sharing?

Argument for cost-sharing Evidence

Reduce inappropriate use?Yes, but reduce appropriateuse too: no selective effect

Contain total / public spending?

No evidence of long-term cost control: elasticity, other costs,

intensity, prices, costs driven by supply

Raise revenue? Yes, but not much

Steering?Maybe, in specific contexts: involves

removing user charges

Everyone else does itDo they? Does that make it

the right thing to do?


Catastrophic health spending worldwide


Out-of-pocket expenditures

More public spending

…and better health policies

... decrease with higher government health expenditures


6 Equity in financing

progressive

proportional

regressive

Direct tax

Wage-related contribution

Private insurance

premium; user fee

income

health

funding


Equity in financing

Progressive: individuals withgreater abilitycontribute a larger proportion of theirincome than do individuals with lowerability to pay

Regressive:individuals withgreater abilitycontribute a lowerproportion of theirincome thanindividualswith lowerability to pay


Step 2: analyzing progressivity of different sources III

Regressive

Kakwani Index = twice the area

between Lorenz and Concentration

curve

Progressive


Distribution of health financing benefits

PHC maybepro-poor?

Hospital care clearly pro-richt

• countries make progress on all three coverage dimensions(population, service, and cost-coverage)

• sufficient resources are raised from public sources. This includes:

– General tax revenues (preferably from direct tax)

– Income-related mandatory social health insurancecontributions.

→ equity should be assured by relying on progressive sources of financing.

• a large proportion of resources is pooled to assure cross-subsidization from healthy to sick, from rich to poor, fromyoung to old.


Conclusions: Achieving Universal HealthCoverage requires that…

• re-allocation enables purchasers to purchase care accordingto population health needs.

• purchasers make pro-active decisions about what services topurchase, from which providers, under which conditions.

• payment systems provide incentives for activity (in terms ofpatients treated and services provided), while keepingexpenditures under control and encouraging efficientbehaviour of providers

→ If UHC is achieved the population has good financialprotection and is effectively covered with essential services


Conclusions: Achieving Universal HealthCoverage requires that…

Documents

Summary: Financing for Universal Health Coverage · 2019. 11. 15. · Health Care Financing module, 6-15 November 2019 Summary: Financing for Universal Health Coverage Reinhard Busse*